BY: Sohail Iqbal Bhatti/GTv News
ISLAMABAD: In a strategic move to reduce costs and ensure a stable supply of liquefied natural gas (LNG), the federal government of Pakistan has decided to shift away from purchasing expensive LNG from the global market.
Instead, it has opted to enter into a government-to-government agreement with Azerbaijan’s state-owned company, SOCAR, to procure one LNG cargo per month.
The Economic Coordination Committee of the Cabinet is anticipated to grant its approval on Monday, June 5, to sign the framework agreement between Pakistan LNG Limited (PLL), a subsidiary of the Petroleum Division, and SOCAR. The agreement will enable the purchase of LNG from SOCAR at a more affordable price compared to the prevailing spot rates in the international market.
The Ministry of Law has already provided the necessary permissions to enter into the agreement with SOCAR’s subsidiaries. Under the arrangement, SOCAR will inform PLL about the availability and pricing of LNG cargo each month. After conducting market assessments and evaluating the power sector’s requirements, PLL will agree to purchase the LNG cargo.
Notably, the cargo will be sold at a rate lower than the prevailing spot rate, and PLL will facilitate payment by opening a letter of credit (LC) in a local bank. SOCAR will cover the confirmation charges of the international bank.
Currently, Pakistan purchases eight cargoes per month from Qatar and one cargo per month from ENI Company under long-term agreements. However, due to high prices in the global market and Pakistan’s credit rating downgrade, PLL faced difficulties in securing LNG cargoes through spot and midterm contracts from February to September last year.
It is worth mentioning that a cooperation agreement in the field of energy was previously signed between Pakistan and Azerbaijan, highlighting their mutual interests in enhancing energy collaboration.
With this significant development, Pakistan aims to ensure a reliable and cost-effective LNG supply, freeing itself from the volatility of global market prices. The government’s decision to forge a closer energy partnership with Azerbaijan’s SOCAR marks a crucial step towards achieving energy security and economic stability for the nation.